European shares rise as Germany boosts recovery hopes

Tue Feb 19, 2013 6:55am EST
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By Marc Jones

LONDON (Reuters) - European shares saw their strongest gains in a week on Tuesday after a pick-up in German economic sentiment data bolstered hopes the region's biggest economy would rebound quickly from its recent bout of weakness.

Following last week's GDP figures showing that the euro zone saw a weaker end to 2012 than expected, Germany's ZEW survey of investors and analysts brightened the mood as it comfortably beat expectations to hit its highest level since April 2010.

"Financial market experts have made their peace with the weak fourth quarter of 2012," said ZEW president Wolfgang Franz. "In their opinion the German economy faces less of a headwind from the euro crisis than throughout the last months."

European stock markets, which have lost around 1.5 percent since the end of January, extended early morning gains after the figures were released to put them on track for their biggest gains in a week.

The FTSEurofirst 300 .FTEU3 had added 0.7 percent by 1120 GMT, led by 1 and 0.8 percent gains on Paris's CAC-40 .FCHI and Frankfurt's DAX .GDAXI and 0.3 percent rises in London .FTSE and Madrid .IBEX.

"Even if the real economy only lives up to half the expectations recently created by soft indicators, any fears of a technical recession (in Germany) should turn out to have been unjustified," said ING economist Carsten Brzeski.

The euro also rose and German government bonds turned negative after the figures, though both moves proved to be brief, with the euro quickly back to $1.3340 and benchmark Bunds back in positive territory at 142.80.

European Central Bank President Mario Draghi's reiteration on Monday that the bank would continue to monitor the euro's recent strength kept downward pressure on the currency, as some took the comments as a hint that a rate cut could be on the cards.   Continued...

Traders are pictured at their desks in front of the DAX board at the Frankfurt stock exchange January 4, 2013. REUTERS/Remote/Joachim Herrmann